Editorial: Legislature shouldn’t pass unfair tax

Employees of businesses with thin profit margins should start worrying about what the Oregon Legislature is scheming to do to their jobs. House Bill 3427 creates a tax that will make it even harder for those businesses to prosper.

The Legislature is not going to be able to come up with a tax everyone likes. But it should try to come up with one that is fair. HB 3427 fails.

A basic principle of taxing people or businesses is that the tax should be proportional to the ability to pay. If a business is faltering, it shouldn’t pay as much as a business that is hoovering in piles of cash. HB 3427 lacks that common sense. That alone should be enough reason for legislators to reject it.

Remember Measure 97? That was a gross receipts tax defeated by voters in 2016. HB 3427 is devised to put lipstick on Measure 97’s pig.

Most simply, a gross receipts tax taxes a business on every penny of revenue coming in. It doesn’t make allowances for expenses. That can be a great way to raise revenue, because businesses have to pay up no matter what. Gross receipts taxes also allow government to collect more revenue because some goods will be taxed multiple times as they are sold and move through production. That’s called tax pyramiding. Measure 97 had all those flaws and more. It didn’t even include exceptions for health care or food.

HB 3427 is different. Businesses do get to deduct some expenses — 25 percent of their labor or purchases, whichever is greater. There’s a small cut in the tax rate of .25% for individuals making up to $125,000 a year or couples making up to $250,000. Groceries would not be taxed. Hospitals and nursing homes would not be taxed. There’s even an effort to ensure businesses are not taxed on taxes and fees they already pay.

But make no mistake. Those changes do not overcome the flaw that it is simply unfair to tax a business without fully considering its ability to pay. There will still be pyramiding. HB 3427 will also hurt the ability of Oregon businesses to be competitive. It would be much fairer to allow businesses to deduct all costs except for whatever value they add to a product. But the supporters of HB 3427 are more interested in raking in revenue than fair taxation.